** **

**UNITED STATES**

**SECURITIESAND EXCHANGE COMMISSION**

**Washington,D.C.  20549**

 

 

**FORM 10-Q**

 

**(Mark one)**

 

**ý  Quarterly report pursuant to Section 13 or15(d) of the Securities Exchange Act of 1934**

 

**For thequarterly period ended September 30, 2002**

 

**OR**

 

**o  Transition report pursuant to Section 13 or15(d) of the Securities Exchange Act of 1934**

 

**CommissionFile Number:  0-31151**

 

 

 

**RADVIEWSOFTWARE LTD.**

(Exactname of registrant as specified in its charter)

 
| **Israel**                       |   | **Not  applicable**  |
|----------------------------------|--------|----------------------|
| (State  or other jurisdiction of |   | (I.R.S.  Employer    |
| incorporation  or organization)  |   | Identification  No.) |

 

 

**7 New England Executive Park**

**Burlington, MA 01803**

(Addressof principal executive offices)

 

##### **Telephone Number (781)238-1111**

(Registrant’stelephone number, including area code)

 

**None**

(Formername, former address and former fiscal year, if changed since last report)

 

 

                Indicateby check mark whether the registrant (1) has filed all reports required to befiled by Section 13 or 15(d) of the Securities Exchange Act of 1934 during thepreceding 12 months (or for such shorter period that the registrant wasrequired to file such reports) Yes ý   No o, and (2) has been subjectto such filing requirements for the past 90 days:  Yes ý   No o.

 

                Asof October 31, 2002, there were 16,462,968 shares of the Registrant’s OrdinaryShares outstanding, excluding 134,000 Ordinary Shares held by the registrant astreasury shares that are “dormant” shares for purposes of Israeli law.

 

 

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**RADVIEW SOFTWARE LTD. AND SUBSIDIARIES**

Form10-Q INDEX

 
| **PART I. FINANCIAL  INFORMATION** |
|------------------------------------|
|                               |   |   |   |   |
| Item  1.                           |   | Condensed  Consolidated Financial Statements: |   |   |
|                               |   |   |   |   |
|                               |   | Condensed  Consolidated Balance Sheets as of September 30, 2002 and December 31, 2001 |   |   |
|                               |   |   |   |   |
|                               |   | Condensed  Consolidated Statements of Operations for the three and nine months ended  September 30, 2002 and 2001 |   |   |
|                               |   |   |   |   |
|                               |   | Condensed  Consolidated Statements of Cash Flows for the nine months ended September 30,  2002 and 2001 |   |   |
|                               |   |   |   |   |
|                               |   | Notes  to Condensed Consolidated Financial Statements |   |   |
|                               |   |   |   |   |
| Item  2.                           |   | Management’s  Discussion and Analysis of Financial Condition and Results of Operations |   |   |
|                               |   |   |   |   |
| Item  3.                           |   | Quantitative  and Qualitative Disclosures About Market Risk |   |   |
|                               |   |   |   |   |
| Item 4.                            |   | Controls and  Procedures |   |   |
|                               |   |   |   |   |
| **PART II. OTHER INFORMATION**     |
|                               |   |   |   |   |
| Item 2.                            |   | Changes in Securities  and Use of Proceeds |   |   |
|                               |   |   |   |   |
| Item  4.                           |   | Submission  of Matters to a Vote of Security Holders |   |   |
|                               |   |   |   |   |
| Item 6.                            |   | Exhibits and  Reports on Form 8-K |   |   |
|                               |   |   |   |   |
| Signatures                         |   |   |   |   |
|                               |   |   |   |   |
| Certifications                     |   |   |   |   |

 

 

2

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**PARTI - FINANCIAL INFORMATION**

 

**RADVIEWSOFTWARE LTD. AND SUBSIDIARIES**

**CONDENSED CONSOLIDATED BALANCESHEETS**

**(In thousands, except share data)**

**(Unaudited)**

 
|                                                                                                                                                                                 |   | **September 30,  2002** |   | **December 31,  2001** |   |
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|-------------------------|--------|------------------------|--------|
| **ASSETS**                                                                                                                                                                           |   |                    |   |                   |   |
| Current Assets:                                                                                                                                                                      |   |                    |   |                   |   |
| Cash and cash equivalents                                                                                                                                                            |   | $                       | 8,872  |                   | $      | 13,182 |   |
| Accounts receivable, net of reserves of $213 at  September 30, 2002 and $209 at December 31, 2001                                                                                    |   | 930                     |   | 1,445                  |   |
| Prepaid expenses and other current assets                                                                                                                                            |   | 428                     |   | 499                    |   |
| Total Current Assets                                                                                                                                                                 |   | 10,230                  |   | 15,126                 |   |
|                                                                                                                                                                                 |   |                    |   |                   |   |
| Property and Equipment, net                                                                                                                                                          |   | 1,109                   |   | 1,687                  |   |
| Other Assets                                                                                                                                                                         |   | 635                     |   | 612                    |   |
|                                                                                                                                                                                 |   |                    |   |                   |   |
| Total Assets                                                                                                                                                                         |   | $                       | 11,974 |                   | $      | 17,425 |   |
|                                                                                                                                                                                 |   |                    |   |                   |   |
| **LIABILITIES  AND SHAREHOLDERS’ EQUITY**                                                                                                                                       |   |                    |   |                   |   |
| Current Liabilities:                                                                                                                                                                 |   |                    |   |                   |   |
| Accounts payable                                                                                                                                                                     |   | $                       | 279    |                   | $      | 413 |   |
| Accrued expenses                                                                                                                                                                     |   | 2,060                   |   | 2,351                  |   |
| Accrued restructuring charge, current portion                                                                                                                                        |   | 95                      |   | 70                     |   |
| Deferred revenue                                                                                                                                                                     |   | 1,109                   |   | 1,357                  |   |
| Total Current Liabilities                                                                                                                                                            |   | 3,543                   |   | 4,191                  |   |
|                                                                                                                                                                                 |   |                    |   |                   |   |
| Long-term Liabilities:                                                                                                                                                               |   |                    |   |                   |   |
| Accrued restructuring charge, less current  portion                                                                                                                                  |   | 123                     |   | 161                    |   |
| Accrued severance                                                                                                                                                                    |   | 723                     |   | 722                    |   |
| Total Long-Term Liabilities                                                                                                                                                          |   | 846                     |   | 883                    |   |
|                                                                                                                                                                                 |   |                    |   |                   |   |
| Total Liabilities                                                                                                                                                                    |   | 4,389                   |   | 5,074                  |   |
|                                                                                                                                                                                 |   |                    |   |                   |   |
| Shareholders’ Equity:                                                                                                                                                           |   |                    |   |                   |   |
| Ordinary shares, NIS 0.01 par value —   Authorized — 40,000,000 shares;  Issued — 16,596,968 shares at September 30, 2002  and 16,532,868 shares at December 31, 2001 |   | 42                      |   | 42                     |   |
| Additional paid-in capital                                                                                                                                                           |   | 54,904                  |   | 55,230                 |   |
| Deferred compensation                                                                                                                                                                |   | (669                    | )      | (1,387                 | )      |
| Accumulated deficit                                                                                                                                                                  |   | (46,592                 | )      | (41,434                | )      |
| Treasury shares, at cost — 134,000 shares                                                                                                                                       |   | (100                    | )      | (100                   | )      |
| Total Shareholders’ Equity                                                                                                                                                      |   | 7,585                   |   | 12,351                 |   |
|                                                                                                                                                                                 |   |                    |   |                   |   |
| Total Liabilities and Shareholders’ Equity                                                                                                                                      |   | $                       | 11,974 |                   | $      | 17,425 |   |

 

The accompanying notes are an integral part of thesecondensed consolidated financial statements.

 

 

3

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**RADVIEW SOFTWARE LTD. ANDSUBSIDIARIES**

**CONDENSED CONSOLIDATED STATEMENTSOF OPERATIONS**

**(In thousands, except per sharedata)**

**(Unaudited)**

 
|                                                                                              |   | **Three  Months Ended  September 30,** |   | **Nine  Months Ended  September 30,** |   |
|---------------------------------------------------------------------------------------------------|--------|----------------------------------------|--------|---------------------------------------|--------|
|                                                                                              |   | **2002**                               |   | **2001**                              |   | **2002** |   | **2001** |   |
| Revenues:                                                                                         |   |                                   |   |                                  |   |   |   |   |   |
| Software licenses                                                                                 |   | $                                      | 664    |                                  | $      | 1,045 |   | $ | 2,443 |   | $ | 4,519 |   |
| Service                                                                                           |   | 600                                    |   | 693                                   |   | 1,813 |   | 2,126 |   |
| Total Revenues                                                                                    |   | 1,264                                  |   | 1,738                                 |   | 4,256 |   | 6,645 |   |
|                                                                                              |   |                                   |   |                                  |   |   |   |   |   |
| Cost of Sales:                                                                                    |   |                                   |   |                                  |   |   |   |   |   |
| Software licenses                                                                                 |   | 14                                     |   | 114                                   |   | 39 |   | 263 |   |
| Service                                                                                           |   | 155                                    |   | 282                                   |   | 474 |   | 964 |   |
| Total Cost of Sales                                                                               |   | 169                                    |   | 396                                   |   | 513 |   | 1,227 |   |
|                                                                                              |   |                                   |   |                                  |   |   |   |   |   |
| Gross Profit                                                                                      |   | 1,095                                  |   | 1,342                                 |   | 3,743 |   | 5,418 |   |
|                                                                                              |   |                                   |   |                                  |   |   |   |   |   |
| Operating Expenses:                                                                               |   |                                   |   |                                  |   |   |   |   |   |
| Sales and marketing                                                                               |   | 1,255                                  |   | 3,298                                 |   | 4,071 |   | 12,249 |   |
| Research and development                                                                          |   | 767                                    |   | 1,463                                 |   | 2,482 |   | 5,129 |   |
| General and administrative                                                                        |   | 552                                    |   | 641                                   |   | 1,654 |   | 2,448 |   |
| Stock-based compensation (1)                                                                      |   | 113                                    |   | 114                                   |   | 392 |   | 715 |   |
| Nonrecurring expenses (Note 4)                                                                    |   | —                                 |   | 1,188                                 |   | 465 |   | 1,425 |   |
| Total Operating Expenses                                                                          |   | 2,687                                  |   | 6,704                                 |   | 9,064 |   | 21,966 |   |
|                                                                                              |   |                                   |   |                                  |   |   |   |   |   |
| Operating loss                                                                                    |   | (1,592                                 | )      | (5,362                                | )      | (5,321 | ) | (16,548 | ) |
|                                                                                              |   |                                   |   |                                  |   |   |   |   |   |
| Interest income                                                                                   |   | 33                                     |   | 147                                   |   | 102 |   | 621 |   |
| Other income (expense)                                                                            |   | (17                                    | )      | 72                                    |   | 61 |   | 60 |   |
|                                                                                              |   |                                   |   |                                  |   |   |   |   |   |
| Net loss                                                                                          |   | $                                      | (1,576 | )                                     | $      | (5,143 | ) | $ | (5,158 | ) | $ | (15,867 | ) |
|                                                                                              |   |                                   |   |                                  |   |   |   |   |   |
| Net loss per share:                                                                               |   |                                   |   |                                  |   |   |   |   |   |
| Net loss per share — Basic and diluted                                                       |   | $                                      | (0.10  | )                                     | $      | (0.32 | ) | $ | (0.31 | ) | $ | (0.97 | ) |
|                                                                                              |   |                                   |   |                                  |   |   |   |   |   |
| Weighted average shares outstanding —  Basic and diluted                                |   | 16,461                                 |   | 16,292                                |   | 16,451 |   | 16,336 |   |
|                                                                                              |   |                                   |   |                                  |   |   |   |   |   |
|                                                                                                   |
| (1) The following summarizes the departmental allocation of the  stock-based compensation charge: |   |                                   |   |                                  |   |   |   |   |   |
| Sales and marketing                                                                               |   | $                                      | 41     |                                  | $      | (12 | ) | $ | 129 |   | $ | 303 |   |
| Research and development                                                                          |   | 47                                     |   | 77                                    |   | 155 |   | 247 |   |
| General and administrative                                                                        |   | 25                                     |   | 49                                    |   | 108 |   | 165 |   |
| Total stock-based compensation                                                                    |   | $                                      | 113    |                                  | $      | 114 |   | $ | 392 |   | $ | 715 |   |

 

Theaccompanying notes are an integral part of these condensed consolidatedfinancial statements.

 

 

4

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**RADVIEW SOFTWARELTD. AND SUBSIDIARIES**

**CONDENSEDCONSOLIDATED STATEMENTS OF CASH FLOWS**

**(Inthousands)**

**(Unaudited)**

** **
|                                                                                      |   | **Nine Months Ended  September 30,** |   |
|-------------------------------------------------------------------------------------------|--------|--------------------------------------|--------|
|                                                                                      |   | **2002**                             |   | **2001** |   |
| Cash Flows from Operating Activities:                                                     |   |                                 |   |   |   |
| Net loss                                                                                  |   | $                                    | (5,158 | ) | $ | (15,867 | ) |
| Adjustments to reconcile net loss to net  cash  used in operating activities  — |   |                                 |   |   |   |
| Depreciation and amortization                                                             |   | 675                                  |   | 825 |   |
| Fixed asset impairment write-off (Note 4)                                                 |   | 45                                   |   | 243 |   |
| Amortization of deferred compensation                                                     |   | 392                                  |   | 715 |   |
| Accrued severance pay                                                                     |   | 1                                    |   | 109 |   |
| Changes in operating assets and liabilities  —                                       |   |                                 |   |   |   |
| Accounts receivable                                                                       |   | 515                                  |   | 1,125 |   |
| Prepaid expenses and other current assets                                                 |   | 71                                   |   | 258 |   |
| Accounts payable                                                                          |   | (134                                 | )      | (1,385 | ) |
| Accrued expenses                                                                          |   | (291                                 | )      | 497 |   |
| Accrued restructuring charge                                                              |   | (13                                  | )      | 387 |   |
| Deferred revenue                                                                          |   | (248                                 | )      | 9 |   |
| Net cash used in operating activities                                                     |   | (4,145                               | )      | (13,084 | ) |
|                                                                                      |   |                                 |   |   |   |
| Cash Flows from Investing Activities:                                                     |   |                                 |   |   |   |
| Purchases of property and equipment                                                       |   | (142                                 | )      | (597 | ) |
| Decrease (increase) in other assets                                                       |   | (23                                  | )      | (129 | ) |
| Net cash used in investing activities                                                     |   | (165                                 | )      | (726 | ) |
|                                                                                      |   |                                 |   |   |   |
| Cash Flows from Financing Activities:                                                     |   |                                 |   |   |   |
| Payment of long-term loans                                                                |   | —                               |   | (3,814 | ) |
| Purchase of treasury shares                                                               |   | —                               |   | (100 | ) |
| Net cash used in financing activities                                                     |   | —                               |   | (3,914 | ) |
|                                                                                      |   |                                 |   |   |   |
| Decrease in cash and cash equivalents                                                     |   | (4,310                               | )      | (17,724 | ) |
|                                                                                      |   |                                 |   |   |   |
| Cash and cash equivalents, beginning of period                                            |   | 13,182                               |   | 33,469 |   |
| Cash and cash equivalents, end of period                                                  |   | $                                    | 8,872  |   | $ | 15,745 |   |
|                                                                                      |   |                                 |   |   |   |
| Cash paid during period for interest                                                      |   | $                                    | 18     |   | $ | 60 |   |
|                                                                                      |   |                                 |   |   |   |
| Supplemental disclosure of noncash financing  and investing activities:                   |   |                                 |   |   |   |
| Reversal of deferred compensation due to option  forfeitures                              |   | $                                    | 326    |   | $ | 3,225 |   |

 

Theaccompanying notes are an integral part of these condensed consolidatedfinancial statements.

 

 

5

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**RADVIEWSOFTWARE LTD. AND SUBSIDIARIES**

**NOTES TO CONDENSED CONSOLIDATEDFINANCIAL STATEMENTS**

**(Unaudited)**

 

 

**1. ****Operations**

 

RadView Software Ltd. (the “Company”) is an Israelicorporation.  The Company develops,markets and supports software that enables organizations to verify thescalability, efficiency and reliability of web applications, and facilitatestheir rapid development.

 

The Company has a history ofincurring net losses and had an accumulated deficit of approximately $46.6million at September 30, 2002.  TheCompany has funded these losses principally from proceeds from equityfinancing.  During the last 12 months,the Company restructured its business to significantly reduce total operatingexpenses through reductions in workforce and the termination of certainleases.  Management believes thatexisting cash and cash equivalents will be adequate to fund operations into2004.

 

**2. ****SignificantAccounting Policies**

 

TheCompany’s condensed consolidated financial statements are prepared inaccordance with accounting principles generally accepted in the UnitedStates.  The significant policiesfollowed in the preparation of the condensed consolidated financial statements,applied on a consistent basis, are as follows:

 

*(a)  Use of Estimates*

 

The preparation of the financial statements inconformity with accounting principles generally accepted in the United Statesrequires management to make estimates and assumptions that affect the reportedamounts of assets and liabilities and disclosure of contingent assets andliabilities as of the date of the financial statements and the reported amountsof revenues and expenses during the reporting periods.  Actual results could differ from theseestimates.

 

*(b)  Financial Statements in U.S. Dollars*

 

Theconsolidated financial statements of the Company have been prepared in U.S.dollars because the currency of the primary economic environment in which theoperations of the Company are conducted is the U.S. dollar. Substantially allof the Company’s sales are in U.S. dollars. Most purchases of materials,components and most marketing and management costs are denominated in U.S.dollars. Therefore, the functional currency of the Company is the U.S. dollar.

 

Transactionsand balances denominated in U.S. dollars are presented at their originalamounts. Transactions and balances in other currencies are translated into U.S.dollars in accordance with the principles set forth in the Financial AccountingStandards Board of the United States (“FASB”) Statement of Financial AccountingStandards (“SFAS”) No. 52, *Foreign CurrencyTranslation*. Accordingly, items have been translated as follows:

 

•                    Monetary Items — At the exchange rate in effect on thebalance sheet date.

•                    Nonmonetary Items — At historical exchange rates.

•                    Revenue and Expense Items — At the exchange rates ineffect as of the date of recognition of those items (excluding depreciation andother items deriving from nonmonetary items).

 

All exchange gains andlosses from the above-mentioned translation (which were immaterial for allperiods presented) are reflected in the statements of operations.  The representative rate of exchange was U.S.$1.00 to 4.871 New Israeli Shekel (“NIS”) at September 30, 2002, U.S. $1.00 to NIS4.416 at December 31, 2001, and U.S. $1.00 to NIS 4.355 at September 30, 2001.

 

 

6

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*(c)  Interim Financial Statements*

* *

Theaccompanying condensed consolidated balance sheet as of September 30, 2002, thecondensed consolidated statements of operations for the three and nine monthsended September 30, 2002 and 2001 and the condensed consolidated statements of cashflows for the nine months ended September 30, 2002, are unaudited but, in theopinion of management, include all adjustments, consisting of normal recurringadjustments, necessary for a fair presentation of results for these interimperiods.  Certain information andfootnote disclosures normally included in financial statements prepared inaccordance with accounting principles generally accepted in the United States havebeen omitted, although the Company believes that the disclosures included areadequate to make the information presented not misleading. The results ofoperations for the three and nine months ended September 30, 2002 are notnecessarily indicative of the results to be expected for the entire fiscalyear.  These financial statements shouldbe read in conjunction with the consolidated financial statements and relatednotes included in the Company’s Form 10-K filed with the SEC on March 25, 2002.

 

*(d)  Software Development Costs*

 

The Company has evaluatedthe establishment of technological feasibility of its products in accordancewith SFAS No. 86, *Accounting for the Costsof Computer Software to Be Sold, Leased or Otherwise Marketed*.  The Company sells products in a market thatis subject to rapid technological change, new product development and changingcustomer needs.  Accordingly, theCompany has concluded that technological feasibility is not established untilthe development stage of the product is nearly complete.  The Company defines technologicalfeasibility as the completion of a working model.  The time period during which costs could be capitalized from thepoint of reaching technological feasibility until the time of general productrelease is very short.  Consequently,the amounts that could be capitalized are not material to the Company’sfinancial position or results of operations. Therefore, the Company has charged all such costs to research anddevelopment expense in the period incurred.

 

*(e)  Revenue Recognition*

* *

The Company recognizesrevenue in accordance with Statement of Position (“SOP”) 97-2, *Software Revenue Recognition,* and SOP98-9, *Modification of SOP 97-2, Software RevenueRecognition, With Respect to Certain Transactions*.  ****SOP 98-9********requires the use of the residual methodfor recognition of revenues when vendor-specific objective evidence exists forundelivered elements but does not exist for delivered elements of a softwarearrangement. If fair value for a delivered element does not exist but the fairvalue does exist for all undelivered elements, the Company defers the fairvalue of the undelivered elements and recognizes the remaining value for thedelivered elements.

 

Revenues from softwareproduct licenses are recognized upon delivery of the software provided there ispersuasive evidence of an agreement, the fee is fixed or determinable andcollection of the related receivable is probable. Revenues under multiple-elementarrangements, which may include software, software maintenance and training,are allocated to each element based on their respective fair values, based onvendor-specific objective evidence. This objective evidence represents theprice of products and services when sold separately. Revenue is recognized forsoftware licenses sold to resellers or distributors at the time of shipment,provided that all revenue recognition criteria set forth in SOP 97-2 arefulfilled.

 

Revenues from software maintenanceagreements are recognized ratably over the term of the maintenance period,which is typically one year. Revenues from training arrangements are recognizedas the services are performed.

 

Amounts collected or billedprior to satisfying the above revenue recognition criteria are reflected asdeferred revenue.  Deferred revenueprimarily represents deferred maintenance revenue.

 

 

7

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**3.  Earnings Per Share**

 

Basicand diluted net loss per share is presented in conformity with SFAS No. 128, *Earnings Per Share*, for all periodspresented.  Basic and diluted net lossper ordinary share was determined by dividing net loss attributable to ordinaryshareholders by the weighted average ordinary shares outstanding during theperiod.  Diluted net loss per ordinaryshare is the same as basic net loss per ordinary share for all periodspresented, as the effects of the Company’s potential additional ordinary shareswere antidilutive.

 

Thecalculation of diluted net loss per share excludes outstanding stock optionsbecause their inclusion would be antidilutive. There were approximately 4,662,000 stock options outstanding atSeptember 30, 2002 and approximately 3,610,000 stock options outstanding atSeptember 30, 2001.

 

**4. ****NonrecurringExpenses**

 

Nonrecurring expensesconsist of restructuring charges and other nonrecurring costs.  Nonrecurring expenses totaled $465,000 forthe nine months ended September 30, 2002, and consisted of restructuringcharges relating to employee severance costs, facility termination charges,fixed asset impairment, and vendor contract termination fees.  Employeeseverance costs resulted from the termination of 28 employees, of whom 15 weresales and marketing employees, 11 were research and development employees, and2 were general and administrative employees.

 

Thefollowing is a reconciliation of the activity in the accrued restructuringcharge for the nine months ended September 30, 2002.

 
| **Description**                  |   | **December  31,  2001** |       | **Provision** |   | **Payments  and  Write-offs** |   | **September  30,  2002** |   |
|----------------------------------|--------|-------------------------|------------|---------------|--------|-------------------------------|--------|--------------------------|--------|
|                             |   | **(in thousands)**      | ** ** |
| Employee severance costs         |   | $                       | —     |          | $      | 349                           |   | $                        | (349   | ) | $ | — |   |
| Facility termination charges     |   | 231                     |       | 46            |   | (76                           | )      | 201                      |   |
| Fixed asset impairment           |   | —                  |       | 43            |   | (43                           | )      | —                   |   |
| Vendor contract termination fees |   | —                  |       | 27            |   | (10                           | )      | 17                       |   |
|                             |   | $                       | 231        |          | $      | 465                           |   | $                        | (478   | ) | $ | 218 |   |

 

Amounts payable within one year have been classifiedas a current liability in the accompanying condensed consolidated balancesheets.

 

Forthe nine months ended September 30, 2001, nonrecurring expenses totaled $1.4million and consisted of a $237,000 payment to a landlord incurred upon thetermination of a facility lease agreement in March 2001, and a $1.2 millionrestructuring charge relating to costs of terminated employee severance, idlelease space, fixed asset impairments and other vendor termination fees.

 

**5.  Disclosures About Segments of an Enterprise**

 

The Company has adopted SFASNo. 131, *Disclosures about Segments of anEnterprise and Related Information.* SFAS No. 131 establishes standards for reporting information regardingoperating segments in annual financial statements and requires selectedinformation for those segments to be presented in interim financial reportsissued to shareholders. SFAS No. 131 also establishes standards for relateddisclosures about products and services and geographic areas. Operatingsegments are identified as components of an enterprise about which separatediscrete financial information is available for evaluation by the chiefoperating decision maker, or decision-making group, in making decisions how toallocate resources and assess performance.

 

The Company’s chiefoperating decision makers, as defined under SFAS No. 131, are the ChiefExecutive Officer and the Chief Financial Officer. To date, the Company hasviewed its operations and has managed its business as principally one operatingsegment.

 

 

8

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The Company’s revenues by thegeographic location of the customer are as follows:

 
|           |   | **Three  months  ended September 30,** |   | **Nine months  ended September 30,** |   |
|----------------|--------|----------------------------------------|--------|--------------------------------------|--------|
|           |   | **2002**                               |   | **2001**                             |   | **2002** |   | **2001** |   |
|           |   | **(In  thousands)**                    |   |
| United States  |   | $                                      | 787    |                                 | $      | 1,191 |   | $ | 2,598 |   | $ | 4,693 |   |
| Europe         |   | 251                                    |   | 223                                  |   | 587 |   | 995 |   |
| Israel         |   | 168                                    |   | 90                                   |   | 538 |   | 401 |   |
| Other          |   | 58                                     |   | 234                                  |   | 533 |   | 556 |   |
| Total revenues |   | $                                      | 1,264  |                                 | $      | 1,738 |   | $ | 4,256 |   | $ | 6,645 |   |

 

 

9

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**MANAGEMENT’S DISCUSSION ANDANALYSIS OF**

**FINANCIALCONDITION AND RESULTS OF OPERATIONS**

 

*Statements in this QuarterlyReport on Form 10-Q concerning RadView’s business outlook or futureperformance; anticipated revenues, expenses or other financial items; productintroductions and plans and objectives related thereto; and statementsconcerning assumptions made or expectations as to any future events,conditions, performance or other matters, are “forward-looking statements” asthat term is defined under U. S. federal securities laws. Forward-lookingstatements are subject to various risks, uncertainties and other factors thatcould cause actual results to differ materially from those stated in suchstatements. These risks, uncertainties and factors include, but are not limitedto: our history of losses; market acceptance of our products; our ability todevelop new products and enhance existing products; impact of significant competition;and other factors detailed in RadView’s filings with the Securities andExchange Commission, including this Quarterly Report on Form 10-Q.*

 

# **Overview**

 

RadView develops, markets and supports software thatenables companies to assure the scalability, efficiency and reliability of webapplications.  In 1997, we introducedour first web-testing product, WebLOAD, which was initially focused onassessing the scalability of web applications. Since then, we have enhanced the functionality of WebLOAD to provide anintegrated solution to assess the performance and accelerate the deployment ofweb applications.  In February 2000, weintroduced WebRM, which is designed to facilitate the systematic verificationof web application quality throughout the application development lifecycle andto accelerate the deployment of high performance web applications.  In August 2001, we introduced WebFT, atesting tool for verification of the functionality of web applications.

 

In January 2002, we restructured our business throughthe termination of 27% of the then current workforce.  As a result of the restructuring, we recorded a restructuringcharge of $334,000 in the first quarter of 2002 consisting of employeeseverance costs, idle lease facilities costs and fixed asset impairmentcosts.  During the second quarter of2002, we recorded additional restructuring costs of $131,000 consisting ofemployee severance cost.  We hadpreviously taken cost reduction actions in July and October 2001, including thetermination of an aggregate of approximately 40% of our workforce and thetermination of certain sales facilities leases.  As a result of these cost reduction actions, we expect thatoperating expenses will be lower in 2002 than in 2001.

 

**Through1996, we received grants totaling $605,000 from the Office of the ChiefScientist of the Government of Israel, that were used primarily to fund apredecessor product.  We are obligatedto pay royalties based on revenues derived from sales of products funded withthese grants, up to 150% of certain grant amounts received.  We have accrued royalties totaling $614,000at September 30, 2002.  In October 2002,the Office of Chief Scientist completed its examination of our technology anduse of grant funding and concluded that our remaining royalty obligation isapproximately $165,000.  We expect toreverse approximately $449,000 of accrued royalties, which will be recorded asa reduction in cost of product sales during the fourth quarter of 2002.**

 

# **SignificantAccounting Policies**

 

***General***

 

We prepare our consolidated financial statements inconformity with accounting principles generally accepted in the U.S.  As such, we are required to make certainestimates, judgments and assumptions that we believe are reasonable based uponthe information available. These estimates and assumptions affect the reportedamounts of assets and liabilities at the date of the financial statements andthe reported amounts of revenues and expenses during the periodspresented.  To fully understand andevaluate our reported financial results, we believe it is important tounderstand our policies for revenue recognition and software development costs.

 

 

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***Revenue Recognition***

 

We recognize softwarelicense revenues upon delivery of our software to customers, providedpersuasive evidence of an agreement exists, the fee is fixed or determinableand collection of the related receivable is probable.  We allocate our software license revenues under arrangementswhere we sell software and services together under one contract to each elementbased on our relative fair values, with these fair values being determinedusing the price charged when that element is sold separately.  If fair value for a delivered element doesnot exist but the fair value does exist for all undelivered elements, we deferthe fair value of the undelivered elements and recognize the remaining valuefor the delivered elements.

 

We generally recognizesoftware license revenues from resellers or distributors at the time ofshipment, provided that all other revenue recognition criteria set forth ingoverning statements of position on software revenue recognition have beenmet.  We recognize services revenuesfrom software maintenance agreements ratably over the term of the maintenanceperiod, typically one year.  Werecognize services revenues from training as the services are performed.Amounts collected or billed prior to satisfying the above revenue recognitioncriteria are reflected as deferred revenue.

 

***Software Development Costs***

 

We account for softwaredevelopment costs in accordance with SFAS No. 86, *Accounting for the Costs of Computer Software to Be Sold, Leased orOtherwise Marketed*.  Softwaredevelopment costs incurred from the point of reaching technological feasibilityuntil the time of general product release should be capitalized.  We define technological feasibility as thecompletion of a working model.  Becausewe sell our products in a market that is subject to rapid technological change,new product development and changing customer needs, we have concluded thattechnological feasibility is not established until the development stage of theproduct is nearly complete.  For us, theperiod in which we can capitalize software development costs is very short, sothe amounts that could be capitalized are not material to our financialstatements.  Therefore, we have chargedall such costs to research and development expense in the period incurred.

 

 

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**Results of Operations**

 

The following table setsforth, as a percentage of total revenues, consolidated statement of operationsdata for the periods indicated:

 
|                       |   | **Three  Months Ended  September 30,** |   | **Nine  Months Ended  September 30,** |   |
|----------------------------|--------|----------------------------------------|--------|---------------------------------------|--------|
|                       |   | **2002**                               |   | **2001**                              |   | **2002** |   | **2001** |   |
| Revenues:                  |   |                                   |   |                                  |   |   |   |   |   |
| Software licenses          |   | 52.5                                   | %      | 60.5                                  | %      | 57.4 | % | 68.0 | % |
| Service                    |   | 47.5                                   |   | 39.5                                  |   | 42.6 |   | 32.0 |   |
| Total revenues             |   | 100.0                                  |   | 100.0                                 |   | 100.0 |   | 100.0 |   |
|                       |   |                                   |   |                                  |   |   |   |   |   |
| Cost of Sales:             |   |                                   |   |                                  |   |   |   |   |   |
| Software licenses          |   | 1.1                                    |   | 6.6                                   |   | 0.9 |   | 4.0 |   |
| Service                    |   | 12.3                                   |   | 16.2                                  |   | 11.1 |   | 14.5 |   |
| Total cost of sales        |   | 13.4                                   |   | 22.8                                  |   | 12.0 |   | 18.5 |   |
|                       |   |                                   |   |                                  |   |   |   |   |   |
| Gross Profit               |   | 86.6                                   |   | 77.2                                  |   | 88.0 |   | 81.5 |   |
|                       |   |                                   |   |                                  |   |   |   |   |   |
| Operating Expenses:        |   |                                   |   |                                  |   |   |   |   |   |
| Sales and marketing        |   | 99.3                                   |   | 189.7                                 |   | 95.7 |   | 184.3 |   |
| Research and development   |   | 60.7                                   |   | 84.2                                  |   | 58.3 |   | 77.2 |   |
| General and administrative |   | 43.7                                   |   | 36.9                                  |   | 38.9 |   | 36.8 |   |
| Stock-based compensation   |   | 8.9                                    |   | 6.5                                   |   | 9.2 |   | 10.8 |   |
| Nonrecurring expenses      |   | 0.0                                    |   | 68.4                                  |   | 10.9 |   | 21.4 |   |
| Total operating expenses   |   | 212.6                                  |   | 385.7                                 |   | 213.0 |   | 330.5 |   |
|                       |   |                                   |   |                                  |   |   |   |   |   |
| Operating loss             |   | (126.0                                 | )      | (308.5                                | )      | (125.0 | ) | (249.0 | ) |
|                       |   |                                   |   |                                  |   |   |   |   |   |
| Interest income            |   | 2.6                                    |   | 8.5                                   |   | 2.4 |   | 9.3 |   |
| Other income (expense)     |   | (1.3                                   | )      | 4.1                                   |   | 1.4 |   | 0.9 |   |
|                       |   |                                   |   |                                  |   |   |   |   |   |
| Net loss                   |   | (124.7                                 | )%     | (295.9                                | )%     | (121.2 | )% | (238.8 | )% |

 

**Three and Nine Months EndedSeptember 30, 2002 and 2001**

 

***Revenues***

 

*Total Revenues*. Total revenues were $1.3 million for the three months ended September30, 2002 and $1.7 million for the same period in 2001, which represents adecrease of $474,000, or 27.3%.  Totalrevenues were $4.3 million for the nine months ended September 30, 2002 and$6.6 million for the same period in 2001, which represents a decrease of $2.4million, or 36.0%.  Total revenuesdecreased due to declines in both software licenses revenues and service revenues.

 

*Software Licenses*.  Software license revenues forthe three months ended September 30, 2002 decreased $381,000, or 36.5%, ascompared to the same period in 2001. Software license revenues were $664,000 for the three months endedSeptember 30, 2002 and $1.0 million for the same period in 2001.  This decrease consisted of a decline insoftware license revenues of $231,000 from U.S. customers and $150,000 frominternational customers.

 

Software license revenues for the nine months endedSeptember 30, 2002 decreased $2.1 million, or 45.9%, as compared to the sameperiod in 2001.  Software licenserevenues were $2.4 million for the nine months ended September 30, 2002 and$4.5 million for the same period in 2001. This decrease consisted of a decline in software license revenues of$1.6 million from U.S. customers and $456,000 from international customers.

 

 

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The decreases in software license revenues for thethree and nine months ended September 30, 2002 as compared to the same periodsin 2001, resulted from lower unit volume sales attributable to weakness in theglobal economy and slower technology spending.

 

*Services*.  Service revenues for the threemonths ended September 30, 2002 decreased $93,000, or 13.4%, as compared to thesame period in 2001.  Service revenueswere $600,000 for the three months ended September 30, 2002 and $693,000 forthe same period in 2001.  This decreaseconsisted of a decline in services revenues of $153,000 from U.S. customers,offset by a $60,000 increase of services revenues from international customers.

 

Service revenues for the nine months ended September30, 2002 decreased $313,000, or 14.7%, as compared to the same period in2001.  Service revenues were $1.8million for the nine months ended September 30, 2002 and $2.1 million for thesame period in 2001.  This decreaseconsisted of a decline in services revenues of $489,000 from U.S. customers,offset by a $176,000 increase of services revenues from international customers.

 

The decrease in U.S. service revenues resulted fromthe decline in maintenance services and training services that typicallyaccompany software license orders.  Theincrease in international service revenues resulted from providing support andmaintenance services to a larger installed customer base internationally.

 

***Cost of Revenues***

 

*Cost of Software Licenses*. Cost of software licenses consists principally of direct product costs,such as product media and packaging, as well as royalties due to thirdparties.  Cost of software licensesdecreased from $114,000, or 10.9% of software license revenue, for the threemonths ended September 30, 2001 to $14,000, or 2.1% of software licenserevenue, for the same period in 2002. Cost of software licenses decreased from $263,000, or 5.8% of softwarelicense revenue, for the nine months ended September 30, 2001 to $39,000, or1.6% of software license revenue, for the same period in 2002.  These decreases were due to thediscontinuance in 2001 of providing for estimated royalty obligations to theOffice of Chief Scientist of the Government of Israel in 2001, as we had fullyprovided for our maximum liability.

 

In October 2002, the Office of Chief Scientistcompleted an examination of our royalty obligations and determined the actualoutstanding royalty obligation to be $165,000. As of September 30, 2002, we had accrued royalties totaling$614,000.  As a result, we expect toreverse $449,000 of our accrued royalties, which will be recorded as areduction in cost of sales during the fourth quarter of 2002.

 

*Cost of Services*. Cost of services consists principally of personnel-related costsassociated with customer support and training. Cost of services decreased from $282,000, or 40.7% of service revenue,for the three months ended September 30, 2001 to $155,000, or 25.8% of servicerevenue, for the same period in 2002. Cost of services decreased from $964,000, or 45.3% of service revenue,for the nine months ended September 30, 2001 to $474,000, or 26.1% of servicerevenue, for the same period in 2002. These decreases were due to reduced personnel costs to provide supportand maintenance services resulting from the headcount reductions taken in thelatter half of 2001 and the first half of 2002.

 

***Operating Expenses***

 

*Sales and Marketing*.  Sales and marketing expensesconsist principally of salaries and commissions earned by sales personnel,travel and marketing program costs such as trade shows, advertising and productpromotion.  Sales and marketing expensesdecreased from $3.3 million, or 189.7% of total revenues, for the three monthsended September 30, 2001 to $1.3 million, or 99.3% of total revenues, for thesame period in 2002.  Sales andmarketing expenses decreased from $12.2 million, or 184.3% of total revenues,for the nine months ended September 30, 2001 to $4.1 million, or 95.7% of totalrevenues, for the same period in 2002. These decreases were due primarily to a 61% reduction of headcount insales and marketing personnel and approximately $700,000 in reductions inquarterly marketing program costs.

 

*Research and Development*.  Research and developmentexpenses consist principally of salaries and related expenses required todevelop and enhance the Company’s products. Research and development expenses decreased 

 

 

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from $1.5 million, or 84.2% of total revenues, forthe three months ended September 30, 2001, to $767,000, or 60.7% of totalrevenues, for the same period in 2002. Research and development expenses decreased from $5.1 million, or 77.2%of total revenues, for the nine months ended September 30, 2001, to $2.5million, or 58.3% of total revenues, for the same period in 2002.  These decreases were due to a 40% reductionin headcount of research and development personnel.

 

*General and Administrative*.  General and administrativeexpenses consist principally of finance, executive and administrative salariesand related expenses, professional fees and other costs associated with being apublic company.  General andadministrative expenses decreased from $641,000, or 36.9% of total revenues,for the three months ended September 30, 2001 to $552,000, or 43.7% of totalrevenues, for the same period in 2002. General and administrative expenses decreased from $2.4 million, or36.8% of total revenues, for the nine months ended September 30, 2001 to $1.7million, or 38.9% of total revenues, for the same period in 2002.  These decreases in absolute dollars were dueto a 61% reduction of headcount in general and administrative personnel.

 

*Stock-based Compensation*. Stock-based compensation expense reflects the accounting chargerelating to the issuance of equity instruments to employees at an exerciseprice below fair market value and to all equity instruments issued tononemployees.  For stock options grantedto employees, the difference between the exercise price and the estimated fairvalue of the ordinary shares on the date options are granted is charged tooperations as stock-based compensation expense over the vesting period of theunderlying options.  For stock optionsgranted to nonemployees, the value of a particular grant as determined by theBlack-Scholes valuation model is charged to operations as stock-based compensationexpense over the service period or vesting period of the underlyingoption.  Stock-based compensationexpense was $113,000 for the three months ended September 30, 2002 compared to$114,000 for the same period in 2001. Stock-based compensation expense was $392,000 for the nine months endedSeptember 30, 2002 compared to $715,000 for the same period in 2001.  These decreases resulted from the forfeitureof employee stock options for terminated employees for whom stock-basedcompensation was originally recorded.

 

Deferred compensation on the unvested options isincluded as a component of shareholders’ equity and amortized to stock-basedcompensation expense over the vesting period of the underlying options.  Deferred stock-based compensation totaled $669,000at September 30, 2002, and will result in additional charges to operationsthrough May 2004.

 

*Nonrecurring Expenses*.  Nonrecurringexpenses totaled $465,000 for the nine months ended September 30, 2002 andconsisted of restructuring charges, all of which was recorded during the firsthalf of 2002.  The Company incurredthese charges as a result of the implementation of additional restructuringplans in an effort to lower operating costs. The restructuring plans andrelated charges recorded in the first half of 2002 consisted of severance costsfor terminated employees of $350,000, lease termination costs of $93,000, fixedasset impairment and other costs of $22,000. A total of 28 employees were terminated, or approximately 31% of thethen current workforce, of whom 15 employees were from sales and marketing, 11employees were from research and development, and two employees were fromgeneral and administrative.

 

Nonrecurring expensestotaled $1.4 million for the nine months ended September 30, 2001 and consistedof a payment of $237,000 to a landlord incurred upon the termination of afacility lease agreement in March 2001 and a restructuring charge of $1.2million.  The restructuring charges in2001 arose from cost reduction actions in July and October 2001, including thetermination of an aggregate of approximately 40% of our workforce and thetermination of certain sales facilities leases.

 

*Interest Income, Net*. Interest income, net consists principally of interestexpense incurred in connection with long-term loans, offset by interest earnedon cash investments.  Interest income,net was $33,000 for the three months ended September 30, 2002 compared to$147,000 for the same period in 2001. Interest income, net was $102,000 for the nine months ended September30, 2002 compared to $621,000 for the same period in 2001.  The decreases in interest income resultedfrom lower invested cash balances and lower interest rates in 2002 as comparedto 2001.

 

*Other Income (Expense), Net*. Other income (expense), net consists principally of currency translationgains and losses.  There was otherexpense of $17,000 for the three months ended September 30, 2002 compared toother

 

 

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income of $72,000 for the same period in 2001.  There was other income of $61,000 for thenine months ended September 30, 2002 compared to other income of $60,000 forthe same period in 2001.  These changeswere due to exchange rate fluctuations.

 

*Income Taxes.*  The Company has estimated net operating losscarryforwards for Israeli tax purposes totaling approximately $16.2 millionthrough September 30, 2002 that would reduce future Israeli income taxes, ifany. These net operating losses may be carried forward indefinitely and offsetagainst future taxable income.  Therewill be no tax benefit available from these losses and no deferred income taxeshave been included in the Company’s financial statements.

 

TheCompany’s U.S. subsidiary has net operating loss carryforwards for U.S. Federaland state tax purposes totaling approximately $23.4 million through September30, 2002.  These losses are available tooffset any future U.S. taxable income of the U.S. subsidiary and will expirebetween 2012 and 2022.  The Company hasrecorded a full valuation allowance against its deferred tax asset due to theuncertainty surrounding the ability and the timing of the realization of thesetax benefits.

 

 

**Liquidity and Capital Resources**

 

Cash and cash equivalents totaled $8.9 million as ofSeptember 30, 2002 compared to $13.2 million as of December 31, 2001.

 

Cashused in operating activities was $4.1 million for the nine months endedSeptember 30, 2002 and $13.1 million for the same period in 2001.  Cash used in operatingactivities for the nine months ended September 30, 2002 was due to a net lossof $5.2 million, a decrease of $134,000 in accounts payable, a decrease of$291,000 in accrued expenses, a decrease of $13,000 in accrued restructuringcharge, and a decrease of $248,000 in deferred revenue, offset, in part, bydepreciation of $675,000, amortization of deferred compensation of $392,000,fixed asset impairment write-offs of $45,000, other non-cash charges of$393,000, a decrease of $515,000 in accounts receivable and a decrease of$71,000 in prepaid expenses.  Cash used for the first nine months of 2001was due to the net loss of $15.9 million and a decrease of $1.4 million inaccounts payable, offset, in part, by depreciation and amortization of$825,000, fixed asset impairment write-offs of $243,000, other noncash chargesof $824,000, a decrease of $1.1 million in accounts receivable, a decrease of$258,000 in prepaid expenses, an increase of $497,000 in accrued expenses, anincrease of $387,000 in accrued restructuring charge, and an increase of $9,000in deferred revenue.

 

Cash used in investing activities was $165,000 forthe nine months ended September 30, 2002 and $726,000 for the same period in2001.  Cash used in investing activitiesfor the nine months ended September 30, 2002 was primarily for purchases of$142,000 in property and equipment and an increase of $23,000 in otherassets.  Cash used in investingactivities for the nine months ended September 30, 2001 was primarily forpurchases of $597,000 in property and equipment and an increase of $129,000 inother assets.

 

There was no cash used in financing activities forthe nine months ended September 30, 2002. Cash used in financing activities for the nine months ended September30, 2001 consisted of $3.8 million for the repayment of long-term loans with abank and $100,000 for the purchase of treasury shares.

 

InApril 2001, our board of directors approved a stock repurchase program underwhich we may repurchase our ordinary shares for an aggregate consideration thatshall not exceed $2.5 million. Purchases may be made based on market conditions from time-to-time atthe discretion of management in open market purchases or privately negotiatedtransactions.  Through September 30,2002, we repurchased 134,000 of our ordinary shares at an aggregate cost of$100,000.

 

We lease all of our officefacilities under noncancellable operating leases that expire over varying termsthrough 2005.  As of September 30, 2002,the future total lease payments under these leases were as follows: $157,000 in2002, $511,000 in 2003, $517,000 in 2004, and $166,000 in 2005.

 

 

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We expect that operating expenses, as well asplanned capital expenditures, will constitute a material use of our cashresources.  We believe that our existingcash and cash equivalents will be sufficient to meet our anticipated needs forworking capital and capital expenditures for at least the next 12 months.  We may find it necessary to obtainadditional equity or debt financing.  Inthe event additional financing is required, we may not be able to completefinancing on acceptable terms or at all.

 

**ITEM3.  QUALITATIVE AND QUANTITATIVEDISCLOSURES ABOUT MARKET RISK**

 

The Company does not use derivative financial instruments in itsinvesting portfolio.  The Company placesits investments in instruments that meet high credit quality standards such asmoney market funds, government securities, and commercial paper.  The Company limits the amount of creditexposure to any one issuer.  The Companydoes not expect any material loss with respect to its investment portfolio.

 

The Company conductsbusiness in various foreign currencies, primarily in Europe and the MiddleEast.  As a result, the Company isexposed to the effect of foreign currency exchange rate fluctuations on theU.S. dollar value of foreign currency-denominated revenues and expenses.  The Company does not use foreign exchangeforward contracts to hedge its foreign currency denominated receivables.  Looking forward, there can be no assurancethat changes in foreign currency rates, relative to the U.S. dollar, will notmaterially adversely affect the consolidated results of the Company.

 

**ITEM4.  CONTROLS AND PROCEDURES**

 

**Evaluationof Controls and Procedures**

 

Within 90 days prior to thefiling of this report, under the supervision and with the participation of theCompany’s management, including the Company’s Chief Executive Officer (“CEO”)and Chief Financial Officer (“CFO”), an evaluation of the effectiveness of theCompany’s disclosure controls and procedures was performed. Based on thisevaluation, the CEO and CFO have concluded that the Company’s disclosurecontrols and procedures are effective to ensure that material information isrecorded, processed, summarized and reported by management of the Company on atimely basis in order to comply with the Company’s disclosure obligations underthe Securities Exchange Act of 1934 and the SEC rules thereunder.

 

**Changes ininternal controls**

 

There were no significantchanges in the company’s internal controls or in other factors that couldsignificantly affect these controls subsequent to the date of the evaluation.

 

 

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**PART II -OTHER INFORMATION**

 

**Item 2. Changes in Securities**

 

**(d)  Use of Proceeds from Saleof Registered Securities**

 

OnAugust 9, 2000, in connection with our initial public offering, the Securitiesand Exchange Commission declared effective a Registration Statement on Form F-1(No. 333-41526) that registered 5,750,000 ordinary shares.  The managing underwriters in the offeringwere Donaldson Lufkin Jenrette, Wit SoundView, Piper Jaffrey, and DLJdirect.

 

On August 15, 2000, we sold 4,000,000 of such ordinaryshares at an initial public offering price of $10.00 per share, generatinggross offering proceeds of $40 million.  After deducting $2.8 million in underwriting discounts andapproximately $1.9 million in other related expenses, the net proceeds to uswere approximately $35.3 million.

 

Through September 30, 2002,we have used $26.4 million of the net proceeds from our initial public offeringas follows:

•                    $1.8 millionfor capital expenditures;

•                    $1.4 millionfor repayment of principal and accrued interest on a loan with Rad DataCommunications, Inc., a related party;

•                    $3.8 millionfor repayment of principal and accrued interest on long-term debt with a bank;

•                    $100,000 forthe repurchase of ordinary shares; and

•                    $19.3 millionfor working capital.

 

## **Item 4.  Submission of Matters to a Vote of SecurityHolders.**

 

**(a)**                                  The Company held anExtraordinary Meeting of Shareholders on November 6, 2002.

** **

**(c)**                                  At the ExtraordinaryMeeting of Shareholders, Mr. David Assia was elected to the Company’s Board ofDirectors, to serve as an External Director, with 12,050,510 voted in favor and12,464 votes withheld.

** **

In addition to the electionof the director, the Shareholders voted on a proposal to ratify and approve thecompensation arrangements for members of the Board of Directors.  The proposal was approved with 11,201,256shares voted in favor, 46,789 shares voted against, and 814,929 abstentions.

 

**Item 6. Exhibits and Reports on Form 8-K**

 

**(a)  Exhibit Index**

 

10.1*               Employee Share Purchase Plan

 

99.1*                                            Certificationpursuant to 18 U.S.C Section 1350, as adopted pursuant to Section 906 of theSarbanes-Oxley Act of 2002.

 

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* Filed herewith

 

 

**(b)  Reports on Form 8-K:**

 

No reports on Form 8-K werefiled in the three-month period ended September 30, 2002.

 

 

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**SIGNATURES**

 

Pursuant to the requirementsof the Securities and Exchange Act of 1934, the registrant has duly caused thisreport to be signed on its behalf by the undersigned thereunto duly authorized.

 
|                          |   | RADVIEW SOFTWARE LTD.                       |
|-------------------------------|--------|---------------------------------------------|
|                          |   |                                        |
| Date:  November 12, 2002 |   |                                             |
|                          |   | Brian E. LeClair                            |
|                          |   | Vice President and  Chief Financial Officer |

 

 

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## **CERTIFICATIONS**

 

# **Ilan Kinreich,President and Chief Executive Officer**

 

I, Ilan Kinreich, certifythat:

 

1.            I have reviewedthis quarterly report on Form 10-Q of RadView Software Ltd.;

 

2.            Based on myknowledge, this quarterly report does not contain any untrue statement of amaterial fact or omit to state a material fact necessary to make the statementsmade, in light of the circumstances under which such statements were made, notmisleading with respect to the period covered by this quarterly report;

 

3.            Based on myknowledge, the financial statements, and other financial information includedin this quarterly report, fairly present in all material respects the financialcondition, results of operations and cash flows of the registrant as of, andfor, the periods presented in this quarterly report;

 

4.            Theregistrant’s other certifying officers and I are responsible for establishingand maintaining disclosure controls and procedures (as defined in Exchange ActRules 13a-14 and 15d-14) for the registrant and we have:

 

a)           designed suchdisclosure controls and procedures to ensure that material information relatingto the registrant, including its consolidated subsidiaries, is made known to usby others within those entities, particularly during the period in which thisquarterly report is being prepared;

 

b)          evaluated theeffectiveness of the registrant’s disclosure controls and procedures as of adate within 90 days prior to the filing date of this quarterly report (the“Evaluation Date”); and

 

c)           presented inthis quarterly report our conclusions about the effectiveness of the disclosurecontrols and procedures based on our evaluation as of the Evaluation Date;

 

5.            Theregistrant’s other certifying officers and I have disclosed, based on our mostrecent evaluation, to the registrant’s auditors and the audit committee ofregistrant’s board of directors (or persons performing the equivalentfunction):

 

a)           all significantdeficiencies in the design or operation of internal controls which couldadversely affect the registrant’s ability to record, process, summarize andreport financial data and have identified for the registrant’s auditors anymaterial weaknesses in internal controls; and

 

b)          any fraud,whether or not material, that involves management or other employees who have asignificant role in the registrant’s internal controls; and

 

6.            Theregistrant’s other certifying officers and I have indicated in this quarterlyreport whether or not there were significant changes in internal controls or inother factors that could significantly affect internal controls subsequent tothe date of our most recent evaluation, including any corrective actions withregard to significant deficiencies and material weaknesses.

 

 
| Date:  November 12, 2002 |   |                                        |
|-------------------------------|--------|----------------------------------------|
|                          |   | Ilan Kinreich                          |
|                          |   | President and Chief  Executive Officer |

 

 

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**Brian E.LeClair, Vice President and Chief Financial Officer**

## ** **

I, Brian E. LeClair, certifythat:

 

1.            I have reviewedthis quarterly report on Form 10-Q of RadView Software Ltd.;

 

2.            Based on myknowledge, this quarterly report does not contain any untrue statement of amaterial fact or omit to state a material fact necessary to make the statementsmade, in light of the circumstances under which such statements were made, notmisleading with respect to the period covered by this quarterly report;

 

3.            Based on myknowledge, the financial statements, and other financial information includedin this quarterly report, fairly present in all material respects the financialcondition, results of operations and cash flows of the registrant as of, andfor, the periods presented in this quarterly report;

 

4.            Theregistrant’s other certifying officers and I are responsible for establishingand maintaining disclosure controls and procedures (as defined in Exchange ActRules 13a-14 and 15d-14) for the registrant and we have:

 

a)           designed suchdisclosure controls and procedures to ensure that material information relatingto the registrant, including its consolidated subsidiaries, is made known to usby others within those entities, particularly during the period in which thisquarterly report is being prepared;

 

b)          evaluated theeffectiveness of the registrant’s disclosure controls and procedures as of adate within 90 days prior to the filing date of this quarterly report (the“Evaluation Date”); and

 

c)           presented inthis quarterly report our conclusions about the effectiveness of the disclosurecontrols and procedures based on our evaluation as of the Evaluation Date;

 

5.            Theregistrant’s other certifying officers and I have disclosed, based on our mostrecent evaluation, to the registrant’s auditors and the audit committee ofregistrant’s board of directors (or persons performing the equivalentfunction):

 

a)           all significantdeficiencies in the design or operation of internal controls which couldadversely affect the registrant’s ability to record, process, summarize andreport financial data and have identified for the registrant’s auditors anymaterial weaknesses in internal controls; and

 

b)             any fraud,whether or not material, that involves management or other employees who have asignificant role in the registrant’s internal controls; and

 

6.            Theregistrant’s other certifying officers and I have indicated in this quarterlyreport whether or not there were significant changes in internal controls or inother factors that could significantly affect internal controls subsequent tothe date of our most recent evaluation, including any corrective actions withregard to significant deficiencies and material weaknesses.

 

 
| Date:  November 12, 2002 |   |                                             |
|-------------------------------|--------|---------------------------------------------|
|                          |   | Brian E. LeClair                            |
|                          |   | Vice President and  Chief Financial Officer |

 

 

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